The US Department of the Treasury’s Community Development Financial Institutions (CDFI) Fund announced a USD 5 billion in New Markets Tax Credits (NMTCs) on 19 September 2024. The latest development brings the total awards granted through the NMTC program to over USD 81 billion.
“Today, we announce the 20th round of New Markets Tax Credit allocations, which has attracted billions in private capital into businesses and projects in low-income communities nationwide as they continue to recover from the impacts of the pandemic,” said CDFI Fund Director Pravina Raghavan. “These investments have spurred job creation, the rehabilitation of commercial corridors, and the development of community facilities like health clinics, charter schools, and food banks, all examples of how New Markets Tax Credit investments are vitally important for low-income urban, rural, and Tribal communities across the country.”
The CDFI announcement reveals that 104 community development entities (CDEs) received NMTC awards for 2023, spanning 35 states, Puerto Rico, and the District of Columbia (DC). Over 20% of the investments will target rural communities, with recipients expected to invest nearly USD 1.2 billion in non-metropolitan counties.
Historically, NMTC Programme awards have generated USD 8 of private investment for every USD 1 invested by the federal government. Through the end of fiscal year 2023, NMTC Programme award recipients deployed more than USD 63.6 billion in investments in low-income communities and businesses; with impacts such as the creation or retention of more than 894,000 jobs, and the construction or rehabilitation of nearly 259.5 million square feet of commercial real estate.
Background
The New Markets Tax Credit (NMTC) Program helps economically distressed communities attract private investment capital. This federal tax credit helps to fill project financing gaps by enabling investors to make larger investments than would otherwise be possible. Communities benefit from the jobs associated with investments in manufacturing, retail, and technology as well as greater access to housing and public facilities such as health, education, and childcare.
Through the NMTC Programme, the Community Development Financial Institutions (CDFI) Fund allocates tax credit authority to Community Development Entities (CDEs) through a competitive application process. CDEs are financial intermediaries through which investment capital flows from an investor to a qualified business located in a low-income community.
CDEs use their authority to offer tax credits to investors in exchange for equity in the CDE. With these capital investments, CDEs can make loans and investments to businesses operating in distressed areas that have better rates and terms and more flexible features than the market. The NMTC Programme helps to offset the perceived or real risk of investing in distressed and low-income communities.
In exchange for investing in CDEs, investors claim a tax credit worth 39% of their original CDE equity stake – which is claimed over a seven-year period – and have the opportunity to enter new markets before competitors. The NMTC Programme enables investors to gain recognition for supporting the revitalisation of America’s communities.
